Penny-Wise but Pound-Foolish in the Game of Employee Engagement

The predictable irrationality of human beings is something that never ceases to amaze me. Dan Ariely paints this picture for us in a way that surely leaves us all slapping our foreheads, wondering how we, too, fall prey to irrational lines of thinking on a regular basis.

Nowhere is this more evident than when we are facing hard times with our businesses – when the economy is in a temporary decline, or competition has released a better product and sales are stalling. Or maybe that same competition is stealing your best sales reps by touting a better culture and a chance to be on the next rocket ship to the moon.

What do we do? Time and time again, I see people making a choice to cut back on the things that are keeping your best people around in the first place: culture.

Have you heard the saying, penny-wise but pound-foolish? That’s when we do something that saves us a little bit of money now, but ends up costing us big in the future. Let’s look at this saying in the context of the rock-and-a-hard-place dilemmas many businesses find themselves in: making personnel cuts during hard times in order to survive. While cuts may be necessary, are you looking at how some of those cuts themselves compromise your company’s ability to thrive down the line and win in the long run?

The question is, how can we be pound-wise, especially during difficult times? It’s easier said than done, to be sure, to keep our heads when the market is soft, when acquisitions and mergers are triggering reorganizations and layoffs and impacting business efficiencies, or when changing consumer habits lead to an industry-wide restructuring.

Right now, one industry that’s finding itself in flux is the retail industry. Many retailers are facing difficult times and their businesses are going through a painful transition.

Traditionally the knee-jerk reaction from businesses during times like this is one, cut your marketing spend and two, cut your HR spend. Those are usually the first to go.

I view this decision as a good move for metrics management today, but not a great leadership move for the long-term. If you want to keep your people, and keep them engaged and performing during difficult transitions, then communicating your commitment to the success of the team, of the business, and the long-term mission is exactly what your folks need to hear. So the areas you’re tempted to cut are exactly the ones you’re going to need operating at a stronger and more effective level than ever before.

HR can help you get through these times and prepare your workforce to face the future as a united team. Let’s say you’re behind in numbers and you’ve got to make cuts across the board, wherever you can find them. Headcounts, systems – everywhere. And now think about how the team is feeling because of this. Morale is down. People are wondering, what’s happening to my team, my department, my boss – and am I next?

As a result, productivity weakens, fear is high, and those people you’ve chosen to keep may decide to leave.

Remember that a big part of leading through change is giving employees exactly what keeps them motivated and engaged despite the changes, and helps them see the light at the end of the tunnel. One way to do this is to keep in mind what employees want, day in and day out. We’ve distilled it down to the four pillars of employee experience: connection, meaning, impact, and appreciation. Sometimes those are delivered in the form of an affirmation of your company’s vision and mission. Sometimes it’s a thank you.

And sometimes, it’s as simple as meaningful feedback for the work they are doing to contribute:

When you choose to cut budget that delivers these things to reduce some expense in the short-term, the impact can be costly in the long-term, and felt by many. Let me paint the real cost to you when this happens:

  • 50% of your staff may not stay, or may not stay as long as they would have if they felt more appreciated.
  • Failing to provide regular feedback and recognition can dramatically affect your rate of retention and turnover.
  • Lack of gratitude, culture, or connection to a purpose can factor heavily into why employees today choose to stay or go.
  • Based on the findings in Gallup’s State of the Workplace 2017, it’s clear that removing – or not investing in the first place – in systems that create a culture of engagement is bad for long-term costs:

As a CEO, I recognize that cuts still need to be made; but also as a CEO, I’m a fan of making decisions with my eyes wide open. If the logic is sound, and cutting people-programs is clearly in your best interest, then that’s the decision that needs to be made. But be aware of the alternative view on this logic – a view that suggests making cuts to programs that clearly impact morale, the culture, and one’s ability to stay engaged throughout the tough times may be the very definition of an act that is penny-wise but pound-foolish.

A solid approach to engagement is critical to maintaining company cohesiveness, communication during a time when people are scared, and a sense of community and culture when your business needs it most. Whether or not you use Kazoo to achieve these goals, consider keeping (and even investing more in) your current people and HR programs.

You can manage the expenses today, but you can’t lead the team to win tomorrow by being penny-wise but pound-foolish. In the long term, our survival depends on our ability to grow our connections to our colleagues and our commitment to core values as we weather the current storms.

About Autumn Manning
Autumn Manning is one of the happiest CEO’s in the world. She spends her days surrounded by a smart team at Kazoo and combines her background in behavioral psychology, human capital management, and building corporate culture to create the world’s best employee experience platform. LinkedIn Twitter

About Kazoo
Kazoo is the employee experience platform powered by the science of motivation and the mission of improving the lives of employees everywhere, one company at a time. Founded in 2013, Kazoo grows company culture and improves bottom-line performance metrics through its robust engagement platform that delivers recognition, rewards, incentives, and team insights. Named to Entrepreneur Magazine’s list of Best Company Cultures in 2017, the Austin-based SaaS company and its technology platform are built on the four pillars of employee experience: connection, meaning, impact and appreciation. To request a demo, visit